Stamps.com Inc. (
Q3 2010 Earnings Conference Call
October 28, 2010 5 PM ET
Jeff Carvari – Director of Finance
Ken McBride – President and CEO
Kyle Huebner – CFO
Sarkis Sherbetchyan – B. Riley & Co.
George Sutton – Craig-Hallum Capital Group
Graeme Rein – Bares Capital Management
Previous Statements by STMP
» Stamps.com Inc. Q2 2010 Earnings Call Transcript
» Stamps.com, Inc. Q1 2010 Earnings Call Transcript
» Stamps.com Inc. Q4 2009 Earnings Call Transcript
» Stamps.com Inc. Q3 2009 Earnings Call Transcript
Operator: Good day, ladies and gentlemen, and thank you for your patience. You joined the Stamps.com Incorporated Third Quarter 2010 Financial Results Call. (Operator Instructions)
I would now like to turn the call over to your host for today, Mr. Jeff Carvari, Director of Finance. Sir, you may begin.
Thanks very much and good afternoon, everyone. On the call today is Ken McBride, our CEO; and Kyle Huebner, CFO. The agenda for today’s call is as follows. We will review the results of our third quarter 2010. Then we’ll discuss that results and talk about our business outlook.
First, the Safe Harbor statement, the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This release contains forward-looking statements such as our expectations and financial guidance that involves risks and uncertainties. Important factors, including the company’s ability to compete and ship its products, maintain desirable economics for its products and obtain or maintain regulatory approval, which could cause actual results to differ materially from those in the forward-looking statements, are detailed in filings with the Securities and Exchange Commission made from time to time by Stamps.com, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, quarterly reports on Form 10-Q and current reports on Form 8-K.
Stamps.com undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Now, let me hand the call over to Ken.
Thank you, Jeff. And thank you for joining us today. We are very pleased with our third quarter performance. The third quarter non-GAAP earnings per share was $0.24, which is up 44% versus last year. This is our highest quarterly non-GAAP earnings per share in the history of the company.
The quarter revenue for our core PC Postage business, which excludes the enhanced promotion channel, was up 8% versus the third quarter last year.
We continue to see strong results from our Enterprise business with third quarter revenue increasing by 61% versus the same quarter last year. Our high-volume shipper segment also continued to show good progress with Q3 postage printed by high-volume shippers growing 55% versus the third quarter last year. And we launched a partnership with Amazon.com during the third quarter.
Also today, we announced a special dividend of $2 per share, which is a testament to the strong free cash flow generation of our business model and continues our demonstrated history of returning excess cash to our shareholders.
On the call today, we will talk about the special dividend, the PC Postage metrics in business, the PhotoStamps business and our financial results and business outlook.
Today, we announced that the Board of Directors has declared a one-time special dividend of $2 per share, representing an expected cash, total cash distribution to shareholders of approximately $28.5 million. The Board of Directors approved the special cash dividend to distribute excess cash from the company’s capital structure and to allow the company’s shareholders to take advantage of the current low dividend tax rates.
As a result of a more optimized capital structure, we expect to realize a higher return on equity going forward to provide shareholders with more of a pure play investment opportunity in our business. We will retain a very strong balance sheet and the required financial flexibility to capitalize on any opportunities going forward.
The special dividend continues our demonstrated history of returning excess cash to our shareholders. Including this special dividend, we have returned over $250 million to our shareholders since 2002. Including a $78 million solid special dividend we paid in 2004 and the current special dividend of $28.5 million, total special dividends represents over a $106 million.
In addition, the company has spent approximately $146 million repurchasing its shares and through this share repurchases, Stamps.com has reduced its current total shares outstanding by approximately 45% compared to the total shares outstanding at the beginning of 2002.
Now, we will begin a more detailed discussion of the PC Postage business. The customer metrics we will discuss on the call exclude all enhanced promotion channel activity. For a more detail definition of how we calculate each of our metrics, you may refer to our quarterly investor metrics spreadsheet at investor.stamps.com.
The non-enhanced promotion PC Postage revenue was $18.2 million in Q3, which was up 8% versus the third quarter of 2009. We’re pleased with the continued revenue growth in 2010 in this core part of our business.
We acquired 49,000 gross small business customers in Q3, which is down 7% versus the third quarter of 2009. Cost per new small business customer acquired or CPA was $124 in Q3, which was up 9% versus the third of 2009. We believe that the challenging economic environment with respect to small business continues to impact our small business customer acquisition.
We would note that the small business surveys such as the one by the National Federation of Independent Businesses and FIB and the one by Wells Fargo Gallup are still showing recessionary level readings and readings that are significantly below the pre-recession levels. We’d also note that the third quarter is our seasonally slowest acquisition quarter historically.